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REPORT 


OF  THE 

FINANCE  COMMITTEE 

OF  THE 


In  Opposition  to  the  Payment  to  the  State  of 
Maryland  of  the  Capitation  Tax  upon 
Passengers  travelling  over  the 
Washington  Branch  Road . 


U a*-*"/  f 

APPROVED  ADD  ADOPTED  BY'  THE  BOARD  OF  DIRECTORS, 


DECEMBER  8th,  1869, 


And  Ordered  to  be  Printed. 


BALTIMORE : 

Tele  Sun  Book  and  Job  Pointing  Establishment. 


O <* 


V A 


■ ' A'  ^ 


REPORT  OF  FINANCE  COMMITTEE. 


The  Committee  on  Finance  respectfully  submits  the  fol- 
lowing statement : 

The  Governor  of  this  State  has  requested  the  Balti- 
more and  Ohio  Railroad  Company  to  pay  into  the 
Treasury  of  the  State  one-fifth  of  the  whole  amount  re- 
ceived by  the  Company  for  the  transportation  of  passengers 
on  the  Washington  Branch  Road  since  July  1st,  1868. 

The  President  of  this  Company  has  requested  the  advice 
and  counsel  of  this  Committee  as  to  the  course  which  the 
Company  ought  to  pursue,  and  has  desired  this  Committee 
to  present  its  views  to  the  Board  of  Directors. 

The  Committee  has  fully  considered  the  subject. 

The  Baltimore  and  Ohio  Railroad  Company  was  incor- 
porated by  the  Maryland  Act  of  1826,  chapter  123.  It 
was  authorized  to  construct  a railroad  from  the  City  of 
Baltimore  to  the  Ohio  river,  and  also  to  “make  lateral 
railroads  in  any  direction  whatsoever,  in  connection  with 
the  said  railroad  ; ” and  was  empowered,  in  the  construc- 
tion of  such  lateral  railroads,  to  exercise  all  the  rights  and 
powers  given  to  the  Company  to  enable  it  to  construct  the 
main  line  from  Baltimore  to  the  Ohio  river.  [1826,  ch. 
123,  sec.  14.] 

In  order  to  enable  the  Company  to  procure  the  necessary 
means,  its  whole  capital  stock  was  exempted  from  taxa- 
tion, and,  therefore,  all  the  works  and  property  of  the 
Company,  whether  upon  the  main  or  lateral  lines,  repre- 
sented by  this  stock,  became,  of  course,  also  exempt  from 
taxation.  [1826,  ch.  123,  sec.  18.] 

This  Act  of  the  General  Assembly  of  Maryland  did  not 
confer  any  power  to  build  the  main  line,  or  lateral  roads, 


2.52-08 

(=> 


4 


beyond  the  limits  of  this  State.  The  State  of  Maryland 
could  only  authorize  the  construction  of  these  main  and 
lateral  lines  within  the  State,  although  it  could  provide  for 
the  organization  of  a Company,  capable  of  acquiring  the 
means  and  receivin  g the  powers  necessary  to  the  execution 
of  the  work  not  only  within,  but  also  beyond  the  limits 
of  the  State.  But  it  was,  of  course,  understood  that  the 
Company,  thus  brought  into  being,  and  enabled  to  acquire 
and  expend  money,  would  obtain  from  the  proper  author- 
ities the  right  to  construct  its  works  within  the  boundaries 
of  other  States,  or  in  the  District  of  Columbia. 

The  original  capital  stock  of  the  Company  was  limited 
by  its  charter  to  $3,000,000.  The  State  provided  [1826, 
ch.  123,  sec.  2,]  that  $1,000,000  of  this  sum  should  be  re- 
served for  subscription  by  the  State,  and  $500,000  for 
subscription  by  the  City  of  Baltimore.  The  remaining 
$1,500,000  was  open  to  the  subscription  of  individuals,  or 
corporations,  and  was  speedily  taken. 

When  the  work  was  actually  commenced,  it  was  soon 
discovered  that  the  undertaking  would  prove  far  more  ex- 
pensive than  its  projectors  had  imagined.  The  State  did 
not  exercise  the  right  of  subscription,  which  it  had  re- 
served ; but  by  the  Act  of  1827,  ch.  104,  agreed  to  sub- 
scribe $500,000  to  the  stock  of  the  Company,  only  upon  the 
condition  that  those  who  had  already  subscribed  $1,500,000 
would  increase  their  subscription  to  $3,000,000.  This 
condition  was  complied  with.  Notwithstanding  this  in- 
crease in  the  amount  of  the  capital  stock,  and  the  subse- 
quent subscription  of  the  City  of  Baltimore  to  $500,000  of 
the  stock,  the  capital,  thus  provided,  was  inadequate  to 
the  building  of  the  projected  railway. 

It  was  the  first  great  work  of  that  description  which  had 
been  undertaken.  The  elements  of  cost  could  not  be  cal- 
culated with  certainty.  It  is  easy,  therefore,  to  under- 
stand why  the  Company,  with  a great  main  line  unbuilt, 
and  possessing  scanty  funds,  shrank  from  applying  part 
of  these  funds  to  the  construction  of  a lateral  road  to 
Washington,  although  it  possessed  ample  power  under  its 
charter  to  build  it  to  the  line  of  the  District  of  Columbia. 


5 


The  pressure,  however,  .was  great  upon  all  sides  to  in- 
duce the  Company  to  undertake  the  work;  and  the  history 
of  the  time  shows  very  clearly  that  the  Company  was 
urged  to  perform  the  duty  upon  unreasonable  terms.  The 
Act  of  1830,  ch.  158,  reserved  to  the  State  the  option  to 
take  stock  in  the  Baltimore  and  Ohio  Railroad  to  the 
amount  of  the  cost  of  this  new  branch,  or  to  take  and  hold 
as  a separate  stock,  five-eighths  of  the  whole  cost  of  this 
branch  line,  and  to  receive  that  proportion  of  its  separate 
earnings,  at  any  time  within  two  years  after  the  branch 
road  was  actually  completed.  It  further  provided  that  if 
the  State  elected  to  do  either  of  these  two  things,  within 
two  years,  it  might  pay  the  price  due  in  money,  or  in  stock 
of  the  State,  bearing  interest  at  the  rate  of  four  and  a half 
per  centum  per  annum.  It  was  provided  by  this  Act  that 
the  fare  to  be  paid  by  each  passenger  traveling  between 
Baltimore  and  Washington  should  not  exceed  one  dollar 
and  fifty  cents. 

This  arrangement,  embodied  in  the  Act  of  1830,  ch.  158, 
was,  as  may  be  supposed,  unproductive  of  results.  The 
capital  stock  of  the  Baltimore  and  Ohio  Railroad  Company 
could  not  have  been  sold  at  par  ; and  it  was  not  very  pro- 
bable that  any  persons  would  agree  to  furnish  the  money 
necessary  to  build  the  road  between  Baltimore  and  Wash- 
ington, when  the  State  had  the  right  to  take  five-eighths 
of  the  investment  from  them  at  cost,  if  it  proved  to  be  a 
profitable  enterprise,  and  was  at  liberty  to  pay  the  amount 
of  such  cost  in  stock,  of  the  State , hearing  four  and  one  half 
j per  cent,  interest , if  it  saw  proper  to  do  so. 

This  Company,  therefore,  did  not  attempt  to  act  upon 
the  arrangement  provided  for  by  the  Act  of  1830,  ch.  158  ; 
nor  did  it  take  any  further  action  in  the  construction  of  the 
branch  road  until  the  year  1833. 

The  public  anxiety  to  secure  such  a railway  between 
Washington  and  Baltimore  had  increased,  but  the  difficulty 
and  cost  of  the  construction  of  the  main  line  occupied  all 
the  resources  of  the  Company. 

By  the  Act  of  March  9th,  1833,  [December  Session,  1832, 
ch.  175,]  the  Legislature,  reviewing  the  provisions  of  the 


6 


Act  of  1830,  ch.  158,  acknowledged  that  they  prevented 
individuals,  or  corporations,  from  embarking  their  funds 
in  the  undertaking.  It  agreed  to  make  an  immediate 
investment  of  $500,000  in  the  work,  provided  the  whole 
cost  of  the  road  was  made  a separate  fund  or  stock,  [1832, 
ch.  175,  sec.  2,]  and  to  pay  for  this  subscription  in  cash,  or 
in  bonds  of  the  State,  bearing  four  and  a half  per  centum 
per  annum  interest,  at  its  option,  provided  that  the  Com- 
pany should  have  no  power  to  pledge  or  mortgage  the 
property  of  the  State  in  the  road.  It  declared  that  the 
rate  of  fare  between  Baltimore  and  Washington  should  not 
be  less  than  two  dollars  and  fifty  cents  for  each  passenger  ; 
[1832,  ch.  175,  sec.  8;]  and  it  provided,  also,  that  the 
State  should  be  allowed  two  additional  directors  in  the 
Baltimore  and  Ohio  Railroad  Company.  [1832,  ch.  175, 
sec.  10.] 

It  also  required  the  Company  to  agree  to  a stipulation 
to  which  we  shall  presently  refer.  Before  alluding  to  this 
stipulation,  however,  it  is  proper  to  note  that  by  the  Act 
of  1833,  ch.  33,  the  State  agreed  to  make  its  payment  in 
more  saleable  bonds,  bearing  an  interest  of  five  per  centum, 
provided  the  Company  would  enter  into  a contract,  which 
had  the  effect  of  protecting  the  State  against  any  increased 
pecuniary  responsibility. 

The  stipulation  imposed  upon  the  Company  by  the  Act 
of  1832,  ch.  175,  sec.  8,  to  which  we  have  alluded,  was  as 
follows : 

“And  be  it  enacted , That  the  Baltimore  and  Ohio  Rail- 
road Company  shall  pay  to  the  Treasurer  of  the  Western 
Shore  of  Maryland,  on  the  first  Monday  in  January  and 
July,  in  each  and  every  year,  for  the  use  of  the  State,  one- 
fifth  of  the  whole  amount  which  may  be  received  for  the 
transportation  of  passengers  on  said  railroad  by  said  Com- 
pany during  the  six  months  last  preceding;  and  it  shall  be 
the  duty  of  the  president  or  chief  officer  of  the  Baltimore  and 
Ohio  Railroad  Company,  to  exhibit,  on  oath  or  affirmation, 
to  the  General  Assembly  on  the  first  day  of  January,  or  as 
soon  thereafter  as  the  said  Assembly  shall  convene,  in  each 
and  every  year,  an  account,  showing  the  gross  amount 
received  by  said  Company  for  the  transportation  of  passen- 
gers on  said  road,  and  the  State’s  proportion  thereof;  pro- 


vided,  that  the  charge  for  conveying  each  person  the  whole 
distance  between  the  cities  of  Baltimore  and  Washington 
shall  not  he  reduced  below  the  maximum  of  two  dollars 
a*  d a half , hereinbefore  established , unless  by  the  consent 
of  the  General  Assembly,  or  in  the  recess  of  that  body,  by 
the  consent  of  the  Governor  and  Council,  which  consent 
shall  be  effective  until  the  end  of  the  session  of  the  General 
Assembly  next  ensuing  ; and  provided  also,  that  in  no  case 
shall  the  amount  received  by  the  State  from  the  Baltimore 
and  Ohio  Railroad  Company  for  the  conveyance  of  each 
person  the  whole  distance  between  the  two  cities,  be  less 
than  twenty-five  cents;  and  provided,  that  at  any  time 
and  at  all  times,  whenever  an  application  is  made  to  the 
Legislature  by  said  Company  to  reduce  said  maximum 
price,  it  shall  be  lawful  for  the  Legislature  to  make  such 
regulation  of  charge  as  it  may  deem  necessary,  not  reducing 
the  transportation  of  passengers  to  the  Company  below  one 
dollar  and  fifty  cents  for  the  whole  distance,  and  rateably 
for  any  shorter  distance.”  [1832,  ch.  175,  sec.  8.] 

It  is,  of  course,  evident  that  the  increase  in  the  rate  of 
fare  upon  the  branch  road,  from  the  minimum  of  one  dollar 
and  fifty  cents  to  the  minimum  of  two  dollars  and  fifty 
cents,  was  intended  to  secure  a larger  revenue  to  the  State, 
under  the  operation  of  the  tax  embodied  in  the  Act.  The 
tax  was  imposed  by  an  amendment  to  the  bill,  made  by 
the  House  of  Delegates  on  February  26th,  1833,  and  the 
rate  of  fare  was  increased  by  an  amendment  made  by  the 
same  body  on  February  27th,  1833.  In  both  provisions 
the  Legislature  consulted  its  own  judgment  exclusively. 

The  Company  possessed,  under  its  original  charter,  the 
right  to  build  this  lateral  road  to  the  boundary  of  the  State, 
and  the  capital  which  it  might  use  in  building  it  was  free 
from  taxation  under  an  existing  law.  [1826,  ch.  123,  sec. 
18.]  It  is  difficult,  therefore,  to  understand  why  the  State 
should  have  considered  itself  entitled  to  exact  from  the 
Company  the  grant  of  one -fifth  of  its  gross  receipts  from 
passengers,  because  of  a subscription  of  $500,000  to  the 
special  stock  created  for  the  construction  of  the  Washing- 
ton Branch  road,  except  upon  the  theory  that  it  was  doubt- 
ful of  the  success  of  the  enterprise,  and  desired  to  be  assured 
against  loss  upon  the  debt  which  it  had  contracted ; for 


8 


this  debt  was  redeemable  after  twenty-five  years.  [1832, 
ch.  175,  sec.  1.] 

The  provisions  of  the  ninth  section  of  the  same  Act 
would  seem  to  demonstrate  that  this  was  its  main  reason 
for  exacting  this  agreement.  For  by  that  section  it  is 
provided  that  the  State  Treasurer  should  invest  annually 
in  some  safe  and  productive  stock,  the  premiums  upon  the 
stock  of  the  State,  sold  to  pay  the  $500,000  subscription  to 
the  stock  of  the  Washington  Branch — all  dividends  re- 
ceived from  its  part  of  the  special  stock  created  for  building 
that  Branch  road — and  the  money  received  from  the  per 
centage  payable  on  the  fares  of  the  passengers  on  that 
road, — and  all  interest  on  such  several  monies,  as  a sinking 
fund,  dedicated  to  the  payment  of  the  interest  and  princi- 
pal of  the  certificates  issued  for  the  $500,000  already 
referred  to. 

It  was  this  fear  of  ultimate  liability  for  the  $500,000 
debt,  created  for  the  aid  of  the  Branch  road,  that  induced 
the  State  to  reserve  the  unusual  power  of  providing,  as  it 
did,  by  the  Act  of  1832,  already  cited,  that  the  charges  for 
transporting  passengers  on  this  road  between  Baltimore 
and  Washington,  should  not  be  less  than  two  dollars  and 
fifty  cents.  For  the  same  reason  it  exercised,  after  that 
time,  its  right  to  assent  to  such  reductions  of  fare  as  the 
Company  might  desire  to  make.  The  examples  of  this  arc 
very  marked,  as  the  following  quotations  will  show : 

“And  be  it  enacted , That  the  Board  of  Directors  be  and 
they  are  hereby  authorized  to  reduce  the  rate  of  tolls,  from 
time  to  time,  in  their  discretion,  for  passengers  upon  the 
Washington  Branch  of  said  road,  by  carrying  them  to  and 
from  the  respective  cities  of  Washington  and  Baltimore,  or 
to  and  from  any  point  or  points  on  said  branch  road,  on 
the  same  day , for  a less  sum  than  is  now  authorized  ; pro- 
vided always,  that  one-fifth  part  of  all  such  passage  money 
so  received,  be  accounted  for  and  paid  into  the  State  Trea- 
sury. ” [1836,  ch.  261,  sec.  7.] 

“Be  it  enacted  by  the  General  Assembly  of  Maryland,  That 
from  and  after  the  first  day  of  June  next,  the  Baltimore 
and  Ohio  Railroad  Company  be  and  they  are  hereby 
authorized  to  reduce  the  rate  of  tolls  for  passengers, 
from  time  to  time  in  their  discretion,  upon  the 


9 


Washington  Branch  of  the  said  road,  by  carrying  them 
to  and  from  the  respective  cities  of  Washington  and 
Baltimore,  for  a less  sum  than  is  now  authorized  ; pro- 
vided, that  the  charge  for  a passenger,  to  and  from  the  said 
cities,  shall  not  he  less  than  one  dollar  and  fifty  cents;  and 
provided  always,  that  one-fifth  of  all  such  passage  money 
so  received,  be  accounted  for  and  paid  into  the  Treasury  as 
now  required  by  law/'  [1844.  ch.  103,  sec.  1.] 

“And  he  it  enacted , That  the  said  Baltimore  and  Ohio 
Railroad  Company  he  and  they  are  hereby  authorized  to 
transport  passengers  on  the  said  Washington  road,  to  and 
from  the  respective  cities  of  Washington  and  Baltimore, 
for  a less  sum  than  is  now  authorized,  in  cases  where  such 
'passengers  shall  perform  the  trip  to  and  from  the  two  cities 
within  the  period  of  three  days;  provided  always,  that  one- 
fifth  part  of  all  such  passage  money,  so  received,  be  ac- 
counted for  and  paid  into  the  State  Treasury  as  afore- 
said.” [1844,  ch.  103,  sec.  2.] 

“And  he  it  enacted , That  the  said  Baltimore  and  Ohio 
Railroad  Company  shall  also  be  authorized  and  required  to 
transport  way  passengers  upon  the  Washington  Branch, 
in  proportion  to  the  charge  from  city  to  city,  with  the 
same  proviso,  and  subject  to  the  same  condition  as  is  ex- 
pressed in  the  first  and  second  sections  of  this  Act,  with 
regard  to  passengers  from  city  to  city.”  [1844,  ch.  103, 
sec  3.] 

It  was  not  until  the  year  1852,  that  the  Company  was 
given  the  right  to  reduce  its  fare  to  any  price  which,  in  its 
judgment,  would  best  subserve  the  interest,  both  of  the 
Company  and  of  the  traveling  public. 

“Be  it  enacted  hy  the  General  Assembly  of  Maryland , That 
the  Baltimore  and  Ohio  Railroad  Company  shall  be  author- 
ized to  regulate  the  tolls  to  be  paid  for  the  transportation 
of  passengers  on  the  Washington  Branch  of  the  said  road, 
in  their  discretion,  not  exceeding  the  maximum  heretofore 
fixed  by  law ; provided,  that  one-fifth  of  the  passage  money 
received  from  the  said  branch  road  be  accounted  for  and 
paid  into  the  State  Treasury,  as  now  required  by  law.” 
[1852,  ch.  328.] 

The  rates  of  fare  charged  by  the  Company  have  been 
determined  by  its  own  discretion  since  the  year  1852;  but 
it  must  be  remembered  that  it  has  always  been  obliged 
to  charge  each  passenger  more  than  the  sum  wiiich 
would  reimburse  the  Company  for  the  service  rendered  ; 


10 


because  it  has  been  constrained  by  the  Acts,  already  cited, 
to  pay  into  the  Treasury  of  the  State  one-fifth  part  of  the 
money  received  from  passengers  on  said  road  ; and  as  a 
matter  of  course  that  charge  is  paid  by  the  passenger. 
Every  tax  falls  at  last  upon  the  consumer. 

The  State  of  Maryland,  in  order  to  pay  for  the  interest 
which  it  now  holds  in  the  Washington  Branch  road, 
issued  to  this  Company  $500,000,  in  a stock  paying  per 
cent,  interest.  It  did  not  increase  its  responsibility  really 
by  changing  its  rate  of  interest  on  these  bonds  to  5 per  cent.; 
because  it  was  protected  by  the  agreement  made  under  the 
Act  of  1833,  ch.  33.  Since  1833,  when  the  Act  of  1832, 
ch.  175,  went  into  effect,  and  up  to  the  close  of  the  fiscal 
year  of  the  State,  ending  September  30th,  1863,  the  account 
of  the  investment  of  the  State  in  the  Washington  Branch 
road  stood,  it  is  believed,  approximately  as  follows : 

Amount  of  5 per  ct.  debt  actually  contracted, 
under  Act  of  1833,  ch.  33,  for  Washing- 
ton Branch  of  Baltimore  and  Ohio  R.  R., 
as  shown  by  Statement  J,  of  Comptroller’s 
report  for  fiscal  year  ending  Sept.  30,  1864,  $489,329  12 
Interest,  say  from  Sept.  30,  1833,  to  Sept.  30, 

1863 — 30  years,  at  5 per  cent.,  - - - - 733,993  68 

Total  amount  of  expenditure  on  account  of 

investment  in  Washington  Branch,  - - $1,223,322  80 


On  the  other  hand,  on  Sept.  30,  1863,  the 
State  owned  its  original  stock  in  Wash- 
ington Branch,  at  par,  -------  $500,000  00 

It  had  received  10  per  ct.  on  this  amount  in 

stock,  at  par,  in  lieu  of  dividends,  in  1838,  50,000  00 

$550,000  00 

It  had  received  in  dividends  to  Sept.  30,  ’63,  965,250  00 

From  the  one-fifth  of  the  receipts  of  passen- 
gers to  Sept.  30,  1863,  -------  1,765,650  06 


$3,280,900  06 


11 


So  that  the  State,  reckoning  its  stock  at  par,  had  made 
upon  the  investment,  up  to  Sept.  30,  1863,  $2,057,577  26. 

The  whole  of  this  5 per  cent,  debt,  created  for  the  pur- 
pose of  paying  the  State  subscription  under  the  Acts 
of  1832,  ch.  175,  1833,  ch.  33,  was  cancelled  and  redeemed 
between  Sept.  30,  1863,  and  Sept.  30,  1864.  [See  Comp- 
troller’s Report,  1864.] 

The  State  has  since  received, from  Sept  30/63, 

to  Oct.  16,  1869,  inclusive,  in  dividends,  $357,500  00 
From  the  one-fifth  of  the  receipts  from  pas- 
sengers, being  the  passenger  tax,  - - 1,250,327  77 

$1,607,827,77 

Therefore,  the  State  has  made,  upon  its  whole  invest- 
ment in  the  Washington  Branch  Road,  up  to  October  16th, 
1869,  a nett  profit  of  $3,665,405  03,  viz  : 


Par  value  of  stock,  - --  --  --  - $550,00jg  00 

Received  from  dividends,  ------  965,250  00 

“ “ ditto  357,500  00 

“ “ one-fifth  tax,  -----  1,765,650  06 

“ “ ditto  -----  1,250,327  77 


$4,888,727  83 

Less  bonds  and  interest,  ------  1,223,322  80 


$3,665,405  03 


It  will  be  seen  from  this  statement  that  the  investment 
made  by  the  State  in  the  separate  stock  created  for  the  pur- 
pose of  constructing  the  Washington  Branch  Road,  has 
been  very  profitable  in  itself,  and  that,  in  point  of  fact, 
there  was  never  any  real  necessity  for  resort  to  the  capita- 
tion tax,  as  a mode  of  indemnifying  itself  against  loss. 

To  this  tax — for  it  is  as  clearly  a tax  as  any  impost  laid 
now  upon  income  by  the  United  States — this  Company  was 
not  compelled  to  make  objection,  so  long  as  the  State 
authorized  no  other  railway  to  be  built  between  Baltimore 
and  Washington,  nor  could  it  reasonably  object  to  the 


12 


authorization  of  any  other  railway  between  these  points, 
if  the  State  deemed  such  a road  to  he  necessary,  and  im- 
posed the  same  charge  upon  the  gross  passenger  receipts  of 
the  new  road.  But  it  so  happens  that  the  State  has  not 
imposed  this  tax  upon  passengers  over  a competing  line 
now  in  course  of  construction  , and  it  probably  will  not 
undertake  to  impose  it  upon  any  road  which  it  may  here- 
after authorize  to  he  constructed  between  Baltimore  and 
Washington. 

It  is  not,  moreover,  probable  that  the  Congress  of  the 
United  States  will  impose  such  a tax  upon  travel  over  any 
road  built  to  or  from  Washington,  under  such  charter  as 
it  may  grant,  because  this  very  tax  upon  passenger  travel, 
imposed  by  the  State  of  Maryland,  has  been  declared  to  be 
n evil  justifying  the  creation  of  railroad  corporations  by 
the  authority  of  Congress. 

This  tax,  therefore,  remains,  and  will  remain,  a charge 
upon  the  Washington  Branch  of  the  Baltimore  and  Ohio 
Railroad  only.  It  will  give  to  every  competing  Company, 
whether  authorized  by  this  State,  or  by  the  United  States, 
a margin  of  twenty  per  cent,  in  the  gross  receipts  within 
which  it  may  reduce  its  fare,  without  loss  to  itself,  when- 
ever it  enters  upon  active  competition  with  the  Washing- 
ton Branch  Road  ; and  it  gives  to  every  such  company  a 
bounty  of  twenty  per  cent.,  if  the  prices  of  travel  are 
maintained  by  any  such  compromise,  as  is  often  resorted 
to  by  competing  lines.  It  will  make  this  Company  the 
object  of  injurious  competition,  or  else  of  odium  and  hos- 
tility. 

The  Baltimore  and  Ohio  Railroad  Company  is,  in  inter- 
est and  ownership,  essentially  a Maryland  corporation. 
No  Internal  Improvement  Company  of  equal  magnitude  in 
this  country  is  owned  as  exclusively  by  citizens  of  the 
State  by  which  it  was  incorporated.  It  has  contributed  in 
no  small  degree  to  the  prosperity  of  the  State,  and  has 
been,  unquestionably,  the  largest  and  most  active  cause  of 
the  growth  and  prosperity  of  the  City  of  Baltimore.  It 
is  identified  with  every  interest  of  that  city.  It  has,  there- 
fore, the  right  to  speak  and  be  heard  whenever  it  presents 


13 


a plain  caeie  to  the  public  consideration.  And  certainly, 
therefore,  it  may  ask  from  the  State  the  formal  abandon- 
ment of  all  claim  to  that  tax  upon  the  gross  receipts  from 
passengers  over  the  Washington  Branch,  which  has  hitherto 
excited  hostility  against  the  Company,  when  that  tax  has 
ceased  to  he  necessary  to  protect  the  State  against  loss, 
because  of  its  subscription  to  the  stock  dedicated  to  the 
construction  of  the  Washington  Branch. 

The  Company,  moreover,  has  not  the  right  to  continue 
to  pay  this  tax.  The  Supreme  Court,  in  the  case  of  Cran- 
dall vs.  State  of  Nevada , 6th  Wallace  Supreme  Court 
Reports,  p.  36,  has,  as  this  Committee  has  been  advised, 
determined  principles  of  Constitutional  law,  which  are  in 
express  opposition  to  the  power  of  the  State  to  derive 
revenue  from  such  a source.  This  Company,  therefore, 
has  not  the  legal  power  to  apply  any  portion  of  its  re- 
ceipts from  passengers  traveling  upon  the  Washington 
Branch  to  the  payment  of  this  tax  ; nor  can  the  sum,  of 
which  the  Governor  requests  payment,  be  considered  to  be, 
in  any  sense,  the  “ money  of  the  State.” 

It  may  be  unwise  to  reduce  the  fare  upon  the  Washing- 
ton Branch  Road,  while  the  State  continues  to  make  this 
claim  to  receive  one-fifth  of  the  whole  amount  of  the 
money  paid  by  passengers  traveling  upon  that  road  ; but 
this  Committee  recommends  that  the  rate  of  fare  of  all  such 
passengers  be  reduced  one-fifth  whenever  the  State  shall 
formerly  abandon  this  claim.  This  Company  has  no  pur- 
pose or  desire  to  appropriate  to  its  own  uses  the  proceeds 
of  the  tax  levied  by  the  State  upon  travel  over  the 
Washington  Branch  Road. 

In  closing  its  report,  the  Committee  of  Finance  desires 
to  say,  that  the  immunity  of  the  stock  of  the  Baltimore 
and  Ohio  Railroad  Company  from  taxation,  has  been 
alluded  to  as  if  this  Company  had  been  the  object  of  the 
peculiar  bounty  of  the  State. 

This  Committee  has  already  shown  the  reason  which 
existed  for  the  grant  of  this  privilege.  The  advantage 
was  not  conceded  to  this  Company  only.  The  Stock  of  the 
Chesapeake  and  Ohio  Canal  Company  was  exempted  from 


14 


taxation  in  the  same  complete  manner  by  the  Act  of  1823, 
chapter  140,  sec.  9 ; and  the  Stock  of  the  Baltimore  and 
Susquehanna  Railroad  Company  was  exempted  from  tax- 
ation in  a manner  equally  complete,  by  the  Act  of  1827, 
chapter  72,  section  20.  Nor  did  the  State  confer  this 
benefit  on  the  last  named  company  only.  In  1854,  the 
Baltimore  and  Susquehanna  Railroad  Company  was  in- 
debted to  the  State  to  an  amount  exceeding  $3,000,000. 
Yet  the  State,  when  it  agreed  that  the  Baltimore  and  Sus- 
quehanna Railroad  Company  should  be  consol iaated  with 
the  three  Pennsylvania  Companies  known  as  the  York  and 
Maryland  Line  Railroad  Company,  the  York  and  Cumber- 
land Railroad  Company,  and  the  Susquehanna  Railroad 
Company,  under  the  name  of  the  Northern  Central  Rail- 
way Company,  did,  by  the  express  terms  of  the  Act  of 
Consolidation,  [1854,  chapter  250,]  agree  that  the  Consol- 
idated Company  should  possess  all  the  powers  and  privi- 
leges before  enjoyed  by  the  Baltimore  and  Susquehanna 
Railroad  Company.  By  the  Act  of  1854,  chapter  260,  the 
State  agreed  to  relinquish  its  claims  against  the  Baltimore 
and  Susquehanna  Railroad  Company  for  an  annuity  of 
$90,000  a year.  The  effect  of  this  arrangement  was,  that 
the  capital  stock  of  three  Pennsylvania  Railroads  consoli- 
dated with  the  Baltimore  and  Susquehanna  Railroad,  in 
creating  the  Northern  Central  Railway  Company,  was  ex- 
empted from  taxation  by  this  State  at  the  same  time  that 
the  State  abandoned  a claim  to  $1,500,000  of  indebtedness. 
The  Northern  Central  Railway  Company  was  left  as  free 
from  taxation  as  the  Baltimore  and  Ohio  Railroad  Com- 
pany, and  was  at  full  liberty,  in  so  far  as  its  charter 
permitted,  to  employ  its  resources  in  aiding  the  construc- 
tion of  branch  lines  unembarrassed  by  any  capitation  tax 
whatever. 

This  Committee  has  no  disposition,  and  no  right,  to  take 
exception  to  any  arrangement  of  the  affairs  of  other 
Companies  which  the  State  has  seen  fit  to  sanction  or 
authorize.  But  if  it  should  happen  that  any  reproach  is 
cast  upon  this  Company  hereafter  for  its  refusal  to  pay  a 
tax  declared  to  be  illegal  by  the  Supreme  Court  of  the 


15 


United  States,  it  will  be  enough  to  remember,  in  its  vindi- 
cation, that  it  did  not  avail  itself  of  its  legal  rights,  even 
for  its  own  protection,  until  it  became  apparent  that,  if  it 
did  not  maintain  them,  it  would  not  enjoy,  in  this  State, 
although  it  was  essentially  in  interest  a Maryland  corpora- 
tion, privileges  equal  to  those  enjoyed  by  a corporation 
essentially  Pennsylvanian  in  policy  and  ownership. 

JOHNS  HOPKINS, 

Chairman  of  Finance,  Committee 
Baltimore  and  Ohio  Railroad  Company. 


3 0112  002430699 


